Global engineering and construction deals insights: Year-end 2019

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Executive summary

2019 ended with a bit of an uptick in overall deal value versus the first three quarters of 2019 with Q419 deal value totaling $24.1 billion. However for the full year, 2019 was the third consecutive year of decreases in annual M&A value. 2019 M&A transactions totaled $85.2 billion down 17% from 2018 value of $102.4 billion (and 28% from 2017 value of $119 billion). Global geopolitical tensions, combined with ongoing trade pressure coming from the US, contributed to significant contraction of cross-border transactions within the sector that in prior years had helped fuel M&A activity, particularly out of Asia and Oceania region. Total cross-border M&A was $23.5 billion, a decrease of $20.5 billion from 2018.

ec-deal-summary

“M&A activity in Q4 2019 was seasonally strong fueled by three large transactions with deal value greater than $1 billion. The strength of Q4 2019 was not enough to mitigate a third consecutive year of decreasing M&A value within the sector.”

Colin McIntyre, US Engineering and Construction Deals Leader

High level trends and highlights of 2019

Highlights

  • In 2019, the deal value declined by 17% to $85.2 billion from $102.4 billion in 2018. However, in Q4 2019, deal value increased by 49% to $24.1 billion when compared to Q3 2019. The deal value in Q4 2019 was the largest when compared with the last three quarters.

  • The deal volume in 2019 declined by a mere 2% to 2,536 deals when compared with 2,592 deals in 2018. Similarly in Q4 2019, deal volume declined by 14% to 614 deals when compared with Q3 2019. Deal volume in Q4 2019 was the second lowest since Q1 2017.

  • In 2019, average deal size declined by 10% to $98.7 million in 2018. However, in Q4 2019, the average deal size increased by almost two thirds to $115.5 million compared to Q3 2019.

Deals by disclosed value and average deal size

In 2019, average deal size declined by 10% to $98.7 million when compared with $109.4 million in 2018. The decline in average deal size is due to reduced number of megadeals in 2019 when compared with 2018. For Q4 2019, average deal size increased by 65% to $115.5 million from $69.8 million in Q3 2019. The increase in quarterly average deal size is attributed to four out of the top ten deals that are falling under Q4 2019. These four deals, worth $9 billion, buoyed the total deal value in Q4 2019.

Financial vs. strategic investors

In 2019, strategic investors contributed 61% of the total deal value and 67% in the deal volume. Similarly, in Q4 2019, strategic investors led with 61% of total deal value and 66% in the deal volume. However, strategic investors witnessed the lowest number of deals in Q4 2019 since Q1 2017.

Regional analysis

In 2019, Asia and Oceania led in deal value and volume in both the acquirer and target region. UK and Eurozone followed Asia and Oceania in deal value and volume for both the acquirer and target region. Similarly in Q4 2019, Asia and Oceania was the leader in deal value and volume in both the acquirer and target region.


Highlights of deal activity


Engineering and construction deals outlook

Despite sector headwinds which dampened underlying sector M&A activity in 2019, the underlying fundamentals remain strong and supportive of M&A activity. Urbanization continues to place ever-increasing demands on aging infrastructures, which combined with housing needs will continue to provide positive factors to drive sector growth and be a catalyst to create M&A opportunity. Recent movements on a potential trade deal between China and the US could reduce some of the friction that has contributed to decreases in deal making within the sector. With record levels of available capital and strong underlying sector fundamentals, 2020 is likely to benefit from reduced trade friction and a softening geopolitical tensions.

About the data

The information presented in this report is an analysis of deals in the global E&C industry. Deal information was sourced from Thomson Reuters and includes deals for which targets have an SIC code that falls into one of 60 E&C industry groups. Certain adjustments have been made to the information to exclude transactions which are not specific to E&C or incorporate relevant transactions that were omitted from the SIC industry codes.

This analysis includes all individual mergers, acquisitions, and divestitures for disclosed or undisclosed values, leveraged buyouts, privatizations, minority stake purchases, and acquisitions of remaining interest announced between January 1, 2017 and December 31, 2019, with a deal status of completed, partially completed, pending, pending regulatory and pending completion, and excludes all rumors and seeking buyers. Additionally, transactions that are spin-offs through distribution to existing shareholders are included.

Percentages and values are rounded to the nearest whole number which may result in minor differences when summing totals.

Contact us

Colin McIntyre

Engineering and Construction Deals Leader, PwC US

Michael Sobolewski

Engineering and Construction Industry Leader, PwC US

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